S&P: Salem County, NJ GO Rating Outlook Revised To Negative On Weakened Finances
The rating action reflects S&P Global Ratings' opinion of the county's history of weakened budgetary performance, resulting in adequate budgetary flexibility that could deteriorate during the two-year outlook period; however, the county currently plans to address rising expenditures.
At the same time, the rating service assigned its 'AA' rating and negative outlook to the county's series 2016 GO refunding bonds and series 2016 public improvement bonds and affirmed its 'AA' rating on the county's existing GO debt.
"We believe there is a one-in-three chance we could lower the rating on the county over the next two years. While the county's budgetary performance and flexibility has weakened and county officials expect this trend to continue for fiscal 2016, the county appears to be making changes for fiscal 2017 and beyond," said S&P Global Ratings credit analyst Victor Medeiros. "If the county's plan for fiscal 2017 and beyond to restore surplus is effective, reversing the current trend and resulting in better-than-weak and better-than-adequate budgetary performance and flexibility scores, respectively, we could revise the outlook to stable. Conversely, if the county cannot execute its plan to restore fund balance, and if budgetary performance were to remain weak, resulting in pressured budgetary flexibility, we could lower the rating."
The county's unconditional, irrevocable GO guarantee ultimately secures all county and Salem County Improvement Authority debt.
Officials plan to use series 2016 general improvement bond proceeds for various capital improvements countywide and series 2016 GO refunding bond proceeds to refund the county's series 2009 governmental loan revenue bonds.